CHAIRMAN’S STATEMENT
Overview
The past few years have been characterised by a deflationary environment with persistent pressure on rentals, occupancy and property values. As a result of these pressures, revenue has been declining, with 2015 registering a 3.53% fall. The diversified nature of our property portfolio has helped reduce the impact of the operating environment on the property portfolio, resulting in the growth in property values in the past five years. In 2015, the pressures on rentals and occupancy levels resulted in a 4.10% impairment on property values. However despite the tough operating environment, the Group has maintained operating profitability. In 2015, net property income after administration expenses grew by 3.45% driven by declining administration expenses, a function of our ongoing rationalisation of overheads and the exclusion of the once-off staff rationalisation costs that occurred in 2014.
As a result of the growth in operating profitability, we are pleased to report that the dividend of 0.055 US cents per share for FY2014 will grow by 7.11% to 0.059 US cents payable from the profits for the year ended 31 December 2015.
The Economy
The macroeconomic environment continued to weaken in 2015 as Zimbabwe’s economic and financial conditions continued to worsen with GDP growth slowing down to an estimated 1.5% against initial estimates of 3.2% for the year, unemployment rising and economic activity increasingly shifting to the informal sector. Annual inflation at December 2015 was -2.47% as the deflationary pressures continued due to the further weakening of the regional currencies to the United States dollar, as well as corporate entities/retailers lowering prices in a bid to stimulate aggregate demand. As more corporate entities down sized, rationalised operations and or shut down, aggregate demand weakened further reducing disposable income.
The key productive sectors of the economy remained subdued during the year. The mining sector remained under pressure as international metal prices continued to decline reducing export earnings, while the agricultural sector continued to under perform due to high operating costs and the inconsistent climate patterns suppressing production. Persistent illiquidity remains in the banking sector with continuing concerns over non-performing loans. Despite the most recent restructuring of the interest rate regime following pressure from the central bank, the cost of funds remains punitive limiting opportunities for companies within these key productive sectors to access competitively priced project and working capital. As these key productive sectors remained under pressure, the demand for commercial real estate remained subdued impeding on prospects for meaningful real estate development.
Business Model
We believe our business model is a simple yet effective model, focusing on our core property portfolio, trading and developing opportunities and property services. The model is supported by our strategic priorities, which drive the business and provide measurable insight into the overall performance. Implementing innovative and practical real estate solutions will be critical in navigating the prevailing operating environment to ensure the property portfolio delivers competitive and sustainable returns.
Appointment of Auditors
PricewaterhouseCoopers Chartered Accountants (Zimbabwe) were appointed as auditors of the Group at the last Annual General Meeting. We thank the outgoing auditors, Ernst & Young Chartered Accountants (Zimbabwe), for the services rendered.
Directorate
Mr John P. Travlos and Mr Munyaradzi J-R Dube resigned from the Board effective 31 December 2015. We thank the outgoing directors for their invaluable service during their tenure.
Dividend
At a meeting held on 19 February 2016, your Board resolved that a final dividend of 0.059 US cents per share be declared from the profits for the year ended 31 December 2015. The dividend will be payable on or about 29 April 2016 to all shareholders of the company registered at close of business on 08 April 2016. The shares of the company will be traded cum-dividend on the Zimbabwe Stock Exchange upto 01 April 2016 and ex-dividend as from 04 April 2016.
Outlook
Investor and business confidence is low, as a result of inadequate infrastructure to support meaningful productive activity thereby limiting economic prospects. There is significant risk of financial distress in the face of persistent de-industrialisation and a growing informal economy. Implementation of structural reforms to improve the operating environment will be the stimulus to attracting foreign direct investment to revive the key productive sectors where demand for commercial real estate is derived.
We continue to be optimistic of the medium to long term prospects of the economy, with the group positioned to exploit opportunities for growth while seeking opportunities to reshape the structure and location of our property assets. In the short term, priority will be to consolidate the existing performance in light of the challenging operating environment by expanding the revenue base while continuing to rationalise overheads to preserve earnings.
Acknowledgements
On behalf of your Board, I appreciate the invaluable support received from all stakeholders.
E.K Moyo
Chairman
19 February 2016
